Over 100 people refusing to pay off loans for defunct Corinthian Colleges

California Attorney General Kamala Harris at a news conference on Oct. 10, 2013, announcing the filing of a lawsuit against Corinthian Colleges.

By

JillianBerman

Reporter

A group of students refusing to pay off loans they took out to attend a now-maligned for-profit college has ballooned from 15 to more than 100 over the last several weeks.

The group, initially dubbed the Corinthian 15, sent a letter to the Department of Education last month, saying they would stop paying the federal student loans they took out to pay to attend various outposts of Corinthian Colleges, a chain of for-profit colleges. Under a deal with Department of Education last year, the company agreed to shut down or sell its schools last year amid allegations the company lured students by advertising dubious job prospects and career services.

The CFPB reached an agreement last month to help Corinthian borrowers get rid of their private debt. That deal, with ECMC Group, which now owns many former Corinthian schools, forgives $480 million for students who took out private loans from Corinthian College that the CFPB describes as “high cost.” According to the CFPB, the loans had interest rates that were typically much higher than their federal counterparts and were often for tuition costs that were more expensive than comparable programs.

Those borrowers covered by the deal will see an immediate 40% drop in their outstanding private student loan debt. Politicians and activists are pressuring the Department of Education to wipe away former Corinthian students’ federal loan debt.

The protesters, part of an Occupy-backed movement called the Debt Collective, have chosen a different route, by simply refusing to pay. And they seem to be attracting attention, in addition to bolstering their ranks. The group is meeting with the CFPB and at least one official from the Department of Education this week.

“This is a historic strike,” Ann Larson, a director of the Debt Collective and one of the organizers of the Corinthian Collective, the group’s pilot initiative, said in an interview on a train Sunday en route to Washington for the meetings. “Officials in Washington recognize that.”

For-profit schools enroll just 13% of students, but account for nearly half of all defaults on federal student loans.

Hundreds of students reached out to the Debt Collective after it first announced the Corinthian campaign last month looking to take part, Larson said. Each interested student was vetted by volunteers and told some of the possible consequences of participating, including garnishing tax refunds, wages, Social Security and a ding to their credit score. In the end some chose not to take part, Larson said.

Many of those who expressed interest are already in default, meaning they’re at risk of suffering these consequences. Larson added that the group is still getting in touch with the students who want to be strikers, indicating that the group will likely continue to grow.

In addition to the strikes, the group is launching a legal strategy. Former Corinthian students and activists plan to submit Defense to Repayment claims on the steps of the Education Department on Tuesday. This legal appeal asks the Education Department to discharge on the basis that the school engaged in wrongdoing.

“Recent criticisms of Corinthian Colleges wrongly disparage the quality of the education our schools provide (and provided) as well as the career services assistance that we offer our graduates,” said Joe Hixson, a spokesman for Corinthian. “Since last summer, our goal has been to enable current students to complete their educational programs with minimal disruption. Unfortunately actions by state and federal regulators make this transition more difficult for students, graduates seeking employment and Corinthian employees.”

As politicians and pundits debate the best way to deal with the more than $1 trillion in outstanding student debt, activists have highlighted the role that for-profit schools play, claiming they encourage students to take on unsustainable debt loads with promises of quick graduation and job placements, but don’t adequately prepare them to achieve those outcomes.

Mortgage Rates

Powered by

This advertisement is provided by Bankrate, which compiles rate data from more than 4,800 financial institutions. Bankrate is paid by financial institutions whenever users click on display advertisements or on rate table listings enhanced with features like logos, navigation links, and toll free numbers. Dow Jones receives a share of these revenues when users click on a paid placement.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information.
All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only.
Intraday data delayed at least 15 minutes or per exchange requirements.